Two Centuries of Economic Growth: Europe Chasing the American Frontier

Robert Gordon

No 4415, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Starting from the same level of productivity and per capita income as the United States in the mid-nineteenth century, Europe fell behind steadily to a level of barely half in 1950, and then began a rapid catch-up. While Europe?s level of productivity has almost converged, its income per person has leveled off at about three-quarters of America?s. How could Europe be so productive yet so poor? The simple answer is that hours per person in Europe have fallen drastically in the past 40 years, reflecting long vacations, high unemployment, and low labour force participation, and only about one-third of the Europe-America difference reflects voluntarily chosen leisure. The Paper contains a welfare analysis of the difference and argues that conventional national income data overstate the advantage of America over Europe, and that Europe's ?welfare? is about 8% below the American level rather than the 25% implied by a comparison of measured income per capita. A historical analysis traces Europe?s falling behind after 1870 to American political unity, fostering large-scale material-intensive manufacturing and a set of marketing innovations, and to a set of additional advantages that would not have been possessed even if Europe had hypothetically created a United States of Europe in 1870. After 1913 the US surged further ahead, due to its early exploitation of the great inventions of electricity and the internal combustion engine, while Europe was distracted by wars and interwar economic chaos. After 1950 Europe?s catch-up was achieved both by exploiting the great inventions 40 years late, and also by the gradual erosion of early American advantages. But after 1995 the gap began to widen again, a development that brings to the forefront fundamental American advantages in fostering and exploiting innovation.

JEL-codes: A10 (search for similar items in EconPapers)
Date: 2004-06
References: Add references at CitEc
Citations: View citations in EconPapers (31)

Downloads: (external link)
https://cepr.org/publications/DP4415 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Two Centuries of Economic Growth: Europe Chasing the American Frontier (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:4415

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP4415

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().